Chuck Yates Needs A Job

0:19 You know, sequels always suck, right? You say that every time. I know, every time. This one we're going to do. The welcome back, dude. Thank you. Glad to be here. You know, I was out at

0:31 Aegis the other day, and I poked my head in your office, and you weren't there. What happened? Where'd you go? Yeah, I decided to resign, take a year off, and I traveled play as much golf as I

0:44 could. And then I was like, yeah, it's too much fun. So I started at another company Yeah, well, it's a travel stuff you did. 'Cause that's, so just step back real quick. That's one of

0:55 the things that I've run around and preached since kind of getting fired and not doing anything for a while, just because of COVID. Having true time off is a real blessing in terms of personally,

1:12 but also believe professionally. 'Cause I was thinking much clearer about things, two weeks after being fired going, why were we doing things this way? Just because NCAP did that, you know, NGP

1:24 did it this way. And so I tell people, you know, if there's a policy I could put in place, I don't know if it's every two years, every three years, whatever, but literally give people 90 days

1:36 off where they don't even have to read emails that truly are gone. Did any of that ring true? Yeah. Well, I mean, it was interesting because, I mean, the only time I got laid off was was

1:47 Enron's bankruptcy when I was 20, 22 years old. So I was more stressed about finding the next job versus trying to enjoy it. So this year, I was preparing in advance of, hey, I'm really going to

2:01 enjoy the time. So I had a buddy, childhood friend, Michael, who had some time. So we're like, all right, we're going to go see this bowl game and this NFL game and this hockey game in one

2:12 weekend in Tampa. Then we're we're going to do March Madness in Vegas, then we're going to go to Japan for a couple We're going to do Mardi Gras and New Orleans. And we're just, we really almost

2:21 had a trip almost every month, every other month, just to kind of decompress. And, uh, and then the wife and the kids are like, okay, you know, that's probably enough that let's, let's slow

2:32 it down. But yeah, I, I think it definitely gives you clarity, allows you to kind of step back and, and as they, as they say, instead of working in your business, you can work on your business

2:41 thinking about what you would do different. And some of the bigger, maybe trends or things that you missed because you were interested in the daily grind. So, yeah, I agree with you. So I've

2:51 told this story before, but I do think it bears repeating when my mom got a hip replacement surgery. I went and saw her the next day. I got how you doing. She's like, well, I was split open. So

3:02 I hurt, but the chronic arthritis that I had in my hip is now gone. And she goes, I had no idea how debilitating that was It's just, and I kind of view that. the same way as stress. And so when

3:19 you truly do get that moment of enjoying, I literally have no responsibility, except for my family and my kids. I think stress and day-to-day grind can be very debilitating. So, yeah, I

3:35 recommend everybody be stress free. There we go, oh, cool. So now what are you doing now? Tell me about the new company. Yeah, so in late 24, I announced the firm emissions experts, very

3:49 similar to what I was previously doing, essentially advisory and brokerage, kind of on environmental credits. So built a small little team, got an office, and yeah, we're off and running. A lot

4:01 of people

4:03 asked when I was coming back and when I announced I was able to kind of be busier than I wanted to the first month or two, but we're finally settled in there but mostly focusing on, you know,

4:15 carbon trading. brokerage, emission reduction credits, which we'll get into a little bit in the Houston area, low carbon fuel standards, renewable energy certificates, kind of all the

4:25 environmental programs, which typically only grow year by year in this country. Yeah. So walk me through some of that because I don't think I understand any of that and probably haven't talked

4:33 about it since the last time you were on the podcast, but let's drill down into one of those. Yeah Last time we focused on the California cap and trade program, I think

4:37 this time let's talk about the

4:49 emission reduction credit program, which is nationwide in non-attainment areas. So what that means is the EPA, federal government, they have monitors with the states and they determine if your

5:04 levels meet the ozone standards And basically it's NOx and VOC during high temperatures for ozone. And so if your area doesn't meet the standards.

5:17 then the EPA says you're in non-attainment and your state agency like the Texas Commission Environmental Quality puts together a program that says, okay, Houston, Dallas, Fort Worth, now San

5:30 Antonio will pass so you don't meet the federal air quality standards. So we need to put a program that kind of limits and kind of sets a strategy to get back in attainment. So Houston, for example,

5:41 it's eight county area. So it's Harris County, where we're in Houston in the seven adjacent counties. If you want to build a chemical plant, power plant, midstream tanks, terminals, et cetera,

5:55 you basically have to buy these emission reduction credits in order to get your air permit to emit knocks and VOC. And the only way to get those credits is you have to buy them. And the way they get

6:07 issued is from someone who's permanently stopped emitting in the area. So that's kind of where the opportunity comes. It was kind of a time zero. There's so much in the way of emissions. Everybody

6:20 gets the credits and is it a baseline? So the program started, you know, in the late '90s and, you know, if you were grandfather in with your existing facilities and then when you shut down, you

6:34 then could start generating credits. So there was no credits that existed when the program started and so that kind of built up what's known as the ERC or Mission Reduction Credit Registry. And then

6:48 companies that came in to do projects that exceeded, it's currently 25 tons of knocks and VOCs. So most of these projects are100 million or plus in size. So there's fewer buyers, but there's a lot

7:01 of entities that could generate these credits upon shutdown. So if you're an oil and gas operator producing a gas well, 10, 20 years, reaches that. of its economic life, you can go ahead, shut

7:15 it in, plug the well, and then you might have been emitting five tons of VOC. You then can go through this process with

7:25 the TCEQ. That's where we help the clients kind of figure out what their emissions were, typically work with their permit consultant, submit everything to the TCEQ, go back and forth, and then

7:34 ultimately that company will be issued five tons of VOC emission reduction credits, which then could then sell to a big chemical power. That

7:44 never crossed my desk when I was at Kane Anderson. There are just tons of these that aren't taking advantage of. Well, one of the reasons is up until probably 2010, the average price per ton was 5,

8:01 000 a ton for VOC. So if you only had five tons, you might get25, 000, but you got to pay your air permit consultant, you have to pay your broker. Yeah, I mean, typically you don't, yeah.

8:15 And because of that, there was very little in it. But we ran out of credits essentially in 2011, a lot of credits they expire. So that's adds a lot of volatility. These credits, it used to be

8:28 when they got issued or from the date of the shutdown, they were good for 10 years to apply to another hair permit. Now it's five years. So there's always credits expiring every year just based on

8:40 the natural cycle of them being issued. So in 2010, we essentially got down to like 60 tons of VOC total. And that was a total in the whole universe. And, you know, it was a big, big chemical

8:55 or refinery that wanted to build. And they were gonna spend billions and didn't have enough credits. So the next trade was 125, 000 a ton. So we jumped from 5, 000. It was like a 10 year average

9:07 to 125, 000.

9:09 And then it was kind of off to the races and we got all the way up to300, 000.

9:14 But we were calling people and saying, Hey, you're manufacturing marble. Can you shut down your equipmentor just move out of the non-attainment areaand we can give you 250, 000 a ton? You have

9:27 five tons. And the guy's like, You'll give me 125 millionif I stop. And the answer is yes. Because - Crazy. These other guys So yeah, so it's a great program, especially for the small, the

9:40 midsize guys. But most people didn't know about it, especially 'cause prices were never warranted. But because prices have gotten so high, it's getting more attention. But a lot of these

9:51 companies, they turn in their permit by rule, get their air permit to emit eight tons. They didn't have to buy any credits. They operate 20, 30 years. And then when they shut down, nobody

10:00 internally even knows that this program exists because they didn't have to buy anything the small to midsize guys.

10:08 You know, education is a huge thing on this topic because most of the guys don't even realize it, except for folks like myself trying to call them and saying, hey, if you shut down, you have 24

10:18 months from your date of last production or when the equipment last run ran in order to apply for these, otherwise you forfeit the right. So who else might be emitting in terms of like, not actual

10:33 names, but types of businesses? Yeah, I mean, so glass manufacturing, cement companies, you know, obviously the guys with tanks and terminals, LNG facilities, power companies.

10:50 Yeah, I mean, really anybody that's consuming natural gas on site for equipment that they're running, you know, is likely, you know, generating some knocks or views. And cattle's not emissions?

11:04 Uh, it's figure that one out. We can go make some money. Well, it's yeah, the old greenhouse gas, you know, the, I'm sure, I don't know if you've seen it where they put, you know, a burnt

11:12 mask on the cow to try to capture it before it releases, but, you know, um, so yeah, so that's, that's really, and then they did expand it in 2017, which became mainstream because before you

11:24 had to be what was called a point source, which it meant, meant you emitted more than 10 tons per year and you calculated those emissions and submitted your annual emissions report to the TCQ. But

11:36 because we, we got low on credits, hence we ran up to that 300, 000 a ton, the TCQ said, well, now a lot, what's called mobile sources. So that's below 10 tons as well as, uh, well, that's

11:49 area sources as well as mobile sources. So we've not really had much like generating credits from mobile sources, but, you know, boot boats in the ship channel, you know, could qualify. Okay.

12:01 Um, it's, it's much harder. in that arena. But yeah, the small oil and gas operators pre 2017, one of the reasons maybe you never discussed it was because they couldn't generate these credits

12:14 because they weren't over 10 tons. Right. And they weren't in the SIP, which was a state implementation plan for the TCQ. So now anybody that really emits and has a permit can generate credits,

12:28 and it's as little as a tenth of a ton. But typically, you got to be at least one or two tons to kind of make it economic. So where are the, uh, where are the areas? And let's say maybe like

12:40 Texas, Texas, Oklahoma, Louisiana, that might qualify, you said Houston, Dallas. Yeah. So Houston, Dallas and Missouri. So that's the eight counties down here. Then you have the Dallas Fort

12:50 Worth, which is similar or another, maybe eight or 10 counties up there. Uh, Louisiana, uh, Baton Rouge, it's four parishes. Uh, they're currently in a Entertainment, they just made it.

13:02 barely. And the state decided to keep the ERC program in place, as opposed to kind of abolishing it. And then if they went back in non-attainment, then they'd have to recreate the program. So

13:14 Baton Rouge, Houston, Dallas for Worth, as well as San Antonio, just Bear County just went non-attainment. There's no credits and there hasn't been a trade. And then same thing with El Paso.

13:27 What's interesting in Dallas, it's an area where a lot of data centers are looking at. And there's currently one half of a ton of knocks, so 05 tons of knocks and 01 VOC. So, not even a ton

13:45 of credits. And so, these data centers that are looking to have their own power sources could be emitting 25-50 tons. They are above that threshold so they'd have to turn in. You have to turn in

13:58 130 or whatever your potential to emit is on your air permit. 30 or 50 tons on your air permit. You have to buy 65 and then let's say you emit 40 tons for a decade, then you shut down, then you

14:11 could try to get 40 tons. So that kind of shows you how the program works to clean the air as you always turn it in more than you get back when you stop. But yeah. Is this potentially wide data

14:23 centers where Amarillo, Abilene, that's why those folks are opening their potentially? I mean, it's much more difficult to get, you know, permitted in the non-attainment areas. And so it seems

14:38 like Dallas, so there's opportunities for companies that could shut down in Dallas or just naturally had shut down or maybe they control closed down a division that could generate these credits. But

14:50 there's so few trades in Dallas, it's even less known that it is in Houston. So. Oh yeah, that's wild. So the,

15:00 Thinking through when you want a phone call just to help me understand exactly how this works, you want a phone call if I'm emitting something and I'm potentially willing to shut down. Yeah, indoor

15:16 install control technology or you're doing a process change

15:22 that you were burning oil now, you're burning natural gas and so you're cleaner. So anything that permanently reduces emissions or you're just retiring some old equipment on a site that you can

15:33 remove out of your permit. So yeah, and you're located in one of these non-attainment counties. And Austin, it's not on the list? No, no. And that's partially just because, you know, they

15:44 don't have the ship channel, they don't have the

15:48 big emissions. There's no big refineries, you know, in the center of Austin. So yeah, they meet the, as of today, they meet the air quality standards but the EPA revisits that. you know,

15:60 supposedly every five years on average, there's a 2008 standard, there's a 2015 standard. And so it does get lowered. So the more it lowers, the more, you know, counties and areas that it can

16:12 bring in. But like Beaumont Port Arthur used to be non-attainment, but then when they shut down a lot of those paper and pulper mills back in the 2000s, air quality improved. So now it's in

16:22 attainment. So you build the same facility in Port Arthur, no credits needed, Corpus Christi, no credits needed You build it in Houston. You might need to spend10, 20 million to buy credits in

16:34 order to get your permit. So do you have to be ultimately an end user to buy the credits or do financial people traffic in them? So no restrictions in Texas and in Louisiana and California, most of

16:51 the states, New Jersey does have a requirement that you have to be a permit holder to purchase the credits. but yeah, here in Texas and Louisiana, anybody can take title. But because it's such a

17:04 niche market, so small, we have very few trading firms that are in the space. Yeah,

17:14 which could be an opportunity, but yeah. So what's maybe a sneaky example of something for people to think through that are listening to have things. I mean, does potentially West Texas pop up on

17:24 this?

17:29 And

17:34 so every oil and gas operator out there needs to be aware of this. So they're potentially planning for this or? Yeah, as of now, they're comfortable below the

17:49 standard. And I'm guessing under this administration, the EPA is probably not gonna be on the top of their list to lower, you know, the standard from 2015, you know, 2015. standards, which is

17:60 currently at 70 parts per billion in the 2008 standards at 75. So, but, you know, I think there was a comment like, you know, Yellowstone, you know, National Park, I think it's like, you

18:13 know, it's in the high 50s as far as, you know, those parts per billion. And so you figure there's no industry, very minor amount of cars, you're just a force. So you just have this natural,

18:25 natural background of this So as you lower it's just out there. So they're in attainment, but it's like we're at 70s. So if you know, they talk about if you go into the 60s, if you get down to 60,

18:36 I mean, majority of the country would be triggered. So it's certainly possible. But as of now, it's really just the population centers, you know, most of California, you know, and other parts

18:50 of the country, but it's mostly where the population is and industry So as of now, West Texas. You don't need anything to expand out there and you don't get anything when you shut down as far as

19:02 these knocks and VOC credits. But keeping good records, the TCQ

19:09 asked lots of questions like, hey, show us documentation the last day you loaded. Show us pictures of the nameplate capacity of the equipment that was out there. So lots of documentation is

19:23 required in order to get these credits. Always joke with my clients It's easier to get an air permit to start a mitting than it is to get credit that you stopped. Oh, interesting. Because you turn

19:34 in your annual admissions and the TTQ looks at it and they're like, okay, thank you,

19:38 you're one of thousands of people doing this. But then when you go to get a mission reduction credits, you could be one of eight at the time applying for credits and the TCQ puts you through a six,

19:48 12 month process, asking for lots of documentation, making sure your calculations are correct. And you did everything by the book in order to get the credits. 'Cause if I'm a glass manufacturer

20:01 out in Fort Bing County, am I actually monitoring my emissions? Are we doing calculations based on my equipment, the age, how much natural gas I'm burning? Yeah, yeah, so you're typically, you

20:14 don't have like a real-time air monitor, you know, on your site, but you're just like, hey, I have this piece of equipment, the manufacturer specs state that, hey, if you run natural gas

20:23 through it, here's what the emissions are, you know, and then there's things called AB 42, where it's like, hey, here's the standards, here's how you calculate the emissions. So most of it's

20:33 like, here's the piece of equipment, how much natural gas did you run through it, and then that's how you calculate your emissions. So we can go back and calculate people's emissions, currently

20:43 the baseline year is 2019. And so that's what the TCQ currently is, put the line in the sand and said, okay, we will give you credits based on what you admitted in 2019. It's actually a two year

20:54 average, you got to pull in another year. but you can't go back to what you admitted in 2005 and ask for credits and the TCQ moves that date up kind of periodically. So we can go back to companies

21:07 that say, hey, we were emitting, we have the documentation, but below were 10 tons, we didn't have to report it. So in the case of a glass manufacturer, if they were over 10 tons of VOC, they

21:18 were probably reporting it already to the state every March. So, but if they were below, we could go back But yeah, it's not monitored, but it's calculations. Got it. So, who needs to get an

21:29 air permit in

21:36 this world? If I build a commercial building, am I doing that or? Yeah, yeah, typically an air permit and, you know, I'll give you the high level and, you know, the other guys are more

21:48 careful. But yeah, it's typically if you're gonna have equipment on site that is burning natural gas or any fossil fuel. Um, so, you know, obviously if you have any chemical plant, but if

22:00 you're just building a, an office building, you're, you're most likely not going to need an, an air permit. Um, uh, you know, but there are things called PBRs permit by rule. So, you know,

22:11 backup generators, you know, maybe you, you do, you know, get an air permit if you have backup generators, but it's a relatively simple process. But the people that spend a year getting their

22:22 permit or folks that are, you know, big industrial type facilities Gotcha. Gotcha. The, um, and transfer of the permit or transfer of the credits, pretty easy, pretty standard documentation or

22:38 is that a whole can of worms? Yeah. So, so the, the TCQ, uh, manages the program. And so everyone that, you know, holds title to credits has an account. And then, um, they've really

22:52 upgraded their system and used to be paper It's through a system called STEERS. you can just submit the transfer and it's done almost in real time. So the transfer process is pretty easy. These are

23:04 all OTC or over-the-counter contracts. There's no futures trading on this, so we're not trading on ICE or the NIMEX, but we're trading just good over-the-counter negotiating a purchase and sale

23:17 agreement. You know, there's a good industry standard contract we've used for a couple of decades now But yeah, once that's agreed, typically transfer happens on the TCQ's website. All prices in

23:29 Texas are reported. Same thing in California, but states like Louisiana does not require. So Texas, you do have historical information on pricing,

23:41 which is helpful to add transparency and more trading. But yeah, transaction once the credits are issued, you can sign a contract, you know, agreed to terms, broker typically sends out a broker

23:55 confirmation. industry in a contract gets reviewed. Let's say that takes a week or two, then you could transfer and then payments typically through business days later. So you could transfer these

24:03 things relatively quickly once they're issued.

24:08 Do banks lend on that? Have we gotten to that point? Or is it still infrequent enough that this happens? And I'm actually wondering what the use case would be for financing the sale of your credits,

24:22 but - Yeah, I mean, it gets really interesting because there's an expiration date on these credits. It's hard to say, hey, this is an asset on the books because if the five-year clock goes out,

24:34 then there were zero. So I've not seen too many people able to go to a bank and say, hey, give me value on these credits that are gonna explode in two years, but I promise, I'll pay back the loan

24:46 before those two years are up, or I'll monetize the credits. What's interesting - PDP well. That's right. It's like a water drive. That's right. So that adds some interesting dynamics. Like in

25:01 2016, you know, when oil, I think was what hit hit around26, I think in January of that year, VOC credits, we had some that were expiring and it's all public record I. mean, they traded, you

25:13 know, 25, 000 a ton. And those are the same credits that in 2013 were 300, 000 a ton. So, you know, the local economy, energy economy really determined. So I love when people are like, oh,

25:27 oil's volatile. And I was like, oh, did you move, you know, 400 on one trade? You know, oh, you know, so it's like the volatility is insane. Like I said, we jumped from 5, 000 to 125,

25:39 then we went up to 300, 000, came back to 25, 000 And then the last reported trade, you know, as of this podcast is 240, 000 a ton. So the bid ask are certainly wide. Most of the time, the

25:54 things only trade when there's a buyer, but now we're also at a 13-year low on supplier credits. Hence, just get a little supply demand, why prices are high. So, sometimes, the other thing asks,

26:07 like, who should call? It's like, well, if anybody has a project in the area that's going to be above these 25 tons of emissions for Knox and VOC, you're going to be in this program in order to

26:19 get your air permit. And so, you need to have this in place, you know, 120 days before you start operating. And so, talk about a fatal flaw. You could build a facility. And then if you wait to

26:31 buy the credits and they're not available, well, technically you can't operate without being out of compliance on day one. So, a lot of banks are very specific about lending money to these

26:42 billion-dollar projects that they have their air credits in place as soon as possible because, you know, there's quite a bit of volatility in supply Oh, interesting, that's fascinating. So in

26:55 terms of the program over the next, call it five to 10 years, does Trump make the program go away? Does the Texas legislature change it up? Do you have any thoughts there if I'm forcing you to

27:10 look into a crystal ball? Yeah, I mean, this started with the 1990 Clean Air Act So it has been in place through multiple Republican terms including Trump's first term, 2016 to 2020. The program

27:27 was not affected at all. Obviously this term, you know, there was an executive order issued April 8th that was discussing programs that were affecting energy prices and it's specifically called out

27:41 the California cap and trade program. You know, prices dropped overnight there Washington has a similar program, the Northeast has carbon trading. power called Reggie. But as of now, they've not

27:54 discussed these local programs specifically around Knox and VOC. So Knox and VOC, the science behind these criteria pollutants, the reason you don't want to live next to a refinery for air quality

28:07 is because Knox and VOC, it's not because of greenhouse gas emissions, which just go up into the atmosphere and it kind of affects everybody the same. So as of now, there's been no discussion that

28:18 I'm aware of going after kind of trying to modify this program from a federal down. Now,

28:27 these programs, they give you so many years to comply with the standard. And if you don't make it, then they bump you up to the next level. So there's five levels of non-attainment. The second

28:41 highest is severe, and that's where Houston and Dallas are. And that's where if you have any project over 25 tons, you trigger the the threshold and you have to buy credits. Well, in July of 2027,

28:53 they're gonna look at the three year average of 24 through 26, all the air monitors throughout the non-attainment area. So somewhere in the ship channels, somewhere in Fort Bend, Montgomery Wall

29:04 are all over the place. And they're gonna take the highest one. And if that's at 76 or higher, you're gonna say, okay, you're still in non-attainment under severe, you've had your chance, now

29:15 you're going to extreme. And the big thing is theirs, the offset ratio increases from, instead of giving 130 to get your 100 your permit, now you'd have to give 150. So demand increases by about

29:29 18 immediately on just the same project buying after that change. And also the threshold drops. Will you be grandfathered in? I mean, if you're - Only if your air permit is issued. Okay. So

29:42 operating facilities, no problem. It's just people getting air permits going forward. And then also the threshold gets lowered from 25 to 10. So the amount of projects, especially like midstream

29:55 companies do between 10 and 25 is a lot, like 249, it's a magical number, the amount of people that that's what they decide to emit and they're permit 'cause they below 25. So it's gonna bring in

30:08 a lot more projects starting potentially July of 27, which would probably take effect in January of 2028 So that's where prices, you know, supply could even be tighter depending on. Who's somebody

30:24 described it, be as generic as you want, but who's somebody that's emitting 10 versus like 25? Yeah, I mean, so a lot of these - A gathering system with 200 wells. I mean, just something, I

30:39 can't wrap my head around. Yeah, I mean, so a lot of these sites that have just a handful of wells, a compression system. a dehigh, a boiler, a heater,

30:54 how many wells feed in that? I mean, it can vary, but it doesn't have to be too big of an operation. I mean, there's companies that you've never heard of that are emitting six, seven, 10 tons

31:05 every single year and they've been doing that for 20 years.

31:11 So a lot of the, and those are the people that are kind of the greatest to take advantage of this because it's like, hey, they've reached the natural economic life of that well. And so they're

31:21 going to go ahead and plug it anyway. And it's like, you know, some of these plugging costs, 50, 000, 100, 000, they might be able to get half a million or even a million dollars from selling

31:29 these credits that more than justifies pain, pain for the, the plugging. So what's interesting and I haven't seen it too much in place. It's like, is there a play to look at buying wells that

31:43 will generate more credits than potentially has oil left in them. need to go buy them. You and I need to look bad, kill some brain cells, maybe over a bottle of wine or two, build a little

31:54 calculator on what that would look at. Because if you think about it, Houston, Harris County, Fort Brane County, the shale revolution kind of passed it by because there wasn't any shale. It's

32:08 old conventional type stuff, most of its water drive type stuff that is late in life and been ignored since the early 2000s. So there's a lot of that stuff. Yeah. I mean, so right now, the only

32:23 requirements, you know, it had to be producing in 2019 and then it had to have produced within the last 24 months of when you apply for the banking application. And outside of that, you just have

32:35 to document, show all the documents and prove that, that you were emitting, you know, VOC or Knox, Knox in the area. So, so yeah, so that those are the more interesting plays because You know,

32:46 I spent my whole career going, we can't buy that shit. That's horrible. Now we want to go find it. Shut it in. Yeah. Yeah. And I mean, there's also, you know, outside of the Houston area,

32:58 um, there's discussions around, you know, greenhouse gas. So you can earn carbon offsets from plugging orphaned wells. Um, stay you, we were, the industry was trying to get abandoned and

33:11 orphaned, but they were getting, I think, a little too broad with the definition of abandoned that, uh, the American carbon registry said we'll only give orphans. So, you know, someone called

33:23 me once, they're like, Hey, we're startup P backed. We're going to be flying drones over these wells to try to take readings to determine which ones are leaking the worst, uh, methane. And then

33:33 we're going to go plug those and then go get carbon offsets and then sell that to, you know, tech companies, whoever the case may want to offset. So yeah, so all of a sudden, you know, wells,

33:48 which were always considered a liability for decades, now under the right circumstances, they could be, you know, revenue positive, you know, under the right circumstances. Yeah,

34:02 that's fascinating to think about. And it's,

34:07 you know, it never ceases to amaze me how wherever we are in the life cycle, an oil and gas company will figure out how to make some money, you know what I mean? Now we're like, oh, we admitted

34:20 stuff when you burned hydrocarbon? We'll capture it and put it in back the ground for you. Don't worry about it, right? That's interesting. So what else out in a kind of, what I'll call

34:29 environmental world carbon, carbon credit, emissions stuff, what else do we need to be thinking about these days? 'Cause that's cool, that's fascinating I'm still too lazy. I think to actually

34:43 go do something, but I'd love to be on the board of a company of that's what we're doing. Yeah, I mean, you can buy old wells. You can throw the parties for the board and the company, I would

34:53 imagine you'd do well in that role. I do, yeah. Oh, I'm great in a board meeting. I sound all pompous and wave marms around a bit and all. You know, one of the other areas we're seeing a lot of

35:04 growth is around renewable fuels. So, you know, landfills, you know, capturing the methane And instead of flaring it, capturing it, turning it into renewable natural gas, and then selling it

35:18 contractually to states like, you know, California, Washington, you know, or some examples that are paying, you know, significant premiums for renewable natural gas. So that's - And what is

35:30 renewable natural gas? Is there actually a definition or is that the beauty of the beholder? Yeah,

35:42 I mean, there's definitely definitions of what qualifies, but yeah, the exact science behind all of it. There could be things that debate, but obviously, you know, using ethanol, you know, in

35:53 fuels, it's like, well, that that's considered renewable, you know, using methane from organic decomposing in landfills, that that's considered renewable. So renewable diesel, renewable

36:03 natural gas, you know, you had, obviously, California has had an interesting, you know, couple of years, two big companies announced they're shutting down refineries, you had other companies

36:13 announced they're switching from diesel to renewable diesel. And that's all around this low carbon fuel standard credit. So, you know, California is telling it's, you know, it's fuel suppliers.

36:25 Hey, you could sell gasoline and diesel all you want, but you're going to then need to be able to either sell some renewable diesel or renewable natural gas or, you know, you know, take a cattle

36:38 farm, you take the methane from from all the cows, And then you could turn that into renewable natural gas. So, they're gonna have to buy these credits and they set it up as kind of like a cap and

36:49 trade program. They set the cap and then they lower it every year. And so these credits should become more valuable over time, but California has bought a lot of renewable fuels. So has Washington,

37:02 Oregon, but the Northeast is looking at a program like this. So that can get really interesting is the more states that value renewable fuels versus historically, it's really just been the West

37:13 Coast. You know, it was interesting when I was at Caine, and this was early days of Caine. So it was, it might have been 2005, something like that. Guy comes in with a poop to power deal. You

37:26 know, I'm gonna hook up all these cows and pick up all the manure. And we spent some time with it. And at some point, somebody was like, I'm not even sure what questions to ask, which probably

37:39 means we shouldn't invest in it So anyway, we didn't invest in it. guy comes back like three years later with another deal of some sort and we're like, Hey, what happened to that poop to power

37:48 deal? And he goes, Oh my God, the first 12 months crushed it. We were outperforming the estimates by five, six acts. I mean, just doing amazing. And then El Nino happened and it changed the

38:03 weather patterns in Southern California. So we got way more rainfall changed the composition of the grass So their poop wasn't the same and our machines didn't work. And we were kind of like, we

38:16 would not have asked that question. Wouldn't have thought of it. Can your machines handle all types of manure? I mean, it's a good question. Wouldn't have thought that one. But no, that's,

38:27 that's interesting on the renewable fuels. Has there been any movement? Cause I've always, I've always said, you know, ultimately kind of like what we did with organics and food, you know.

38:42 Hey, you want these standards and I know they're no organic standards, but generally speaking, it's supposed to be healthier and you pay more for it. Have they gone any way, shape or form to

38:54 letting an individual consumer in some way, shape or form by renewable natural gas? Has anything like that? I've always saw the oil and gas companies because you literally have a pump right there

39:08 where somebody can make a decision and whether it's a buy this gasoline, it costs more, but it's better for the environment. I just haven't seen anything like that. Yeah. Obviously, you have

39:20 certain vehicles like in California, a lot of the fleets, the UPSs,

39:29 the FedExs, they're all on renewable natural gas because they're in the transportation system there is they're actually getting fuel for free and paid to do that, but On a residential level, I

39:44 don't know if you can call a center point and say, hey, please deliver me renewable natural gas and add a fee. Now, we did electricity. I think there was a plan where - With renewable energy

39:58 certificates. Yeah, exactly. So you certainly, yeah, when you buy your electricity plan, you can go 100 renewable, 20 renewable, and that's all laid up front And then those companies can just

40:09 sell you power from the coal plant or natural gas plant, more likely down the street, and then they could buy renewable energy certificates from West Texas, and then just attach it, and then say,

40:19 Hey, your power is 100 renewable

40:22 based on these certificates. So depending on how you calculate, you could calculate what the carbon emissions are associated with regular natural gas versus renewable natural gas, and you could

40:33 kind of bundle it together with with her certificate. But Yeah, I mean, I think there's more work. I know the UK was talking about having, everybody having a carbon footprint associated with

40:44 themselves, and then maybe you can then sell some of your access to someone else, is it more? But we haven't seen the calculations or methodology get down to the individual level, but it's

40:58 probably coming, just depends along. Part of me says, we're too lazy as an industry potentially to do that. The other half of me says is the industry said, man, if we can make some money doing

41:11 that, we would in a heartbeat. We just don't think people will pay for it. Yeah.

41:17 The one thing I'll say about what they're doing in the UK, at least with the power meters, they've got real time meters in the house, and it actually alters behavior. You're looking over at your

41:29 meter going, okay, we're spending too much right now. We need to go put on a sweater and you know, wrap ourselves in a blanket. Yeah. So, I mean, there's something real to transparency and

41:42 pricing. Yeah. My wife doesn't believe in changing behavior based on AC, but so she's just going to keep it where she wants to keep it. But

41:52 yeah, I mean, I think if you allowed people to make real-time choices and have put a price associated with it, yeah, definitely can change behavior. And I mean, you are seeing when people fly

42:04 flights, they can check a box, Haiti, you want this flight to be carbon neutral, and then the airlines buy carbon offsets. And same thing, do you want your package to be delivered carbon neutral?

42:15 So I mean, you're seeing it in some areas, but it hasn't gotten into mainstream every day. If you're at the counter at your local

42:25 restaurant saying, Haiti, you want this to be carbon neutral. Maybe at some point, they're like, OK, we had an extra 5 to your bill But I will say this you know, to all my energy friends are

42:37 like, Oh, these carbon credits are BS and stuff. I mean, I'm always over the mindset, Hey, if it's voluntary, you know, great, let it happen. And there is some real huge strong demand from

42:52 the market, from Microsoft and these big tech companies that truly care about net zero. And maybe it's just a marketing ploy by those companies, but I do think it's real. Oh, yeah. I mean,

43:04 there's quite a bit of money that's spent. And like I said, there's well, orphan wells that are being plugged today because of carbon offsets. Otherwise, they would just sit out there. So, I

43:13 mean, it is benefiting, certainly benefiting society, because these carbon offsets exist. Now, I mean, people will debate, well, you know, does that carbon offset in the Amazon rainforest

43:26 that you said, Hey, if you don't give us carbon offsets, we're going to lose 3 a year. And then the one next door, you know, they only had 03 loss over the same period of time. And you're like,

43:36 well, did that really justify the carbon offset? And there was, you know, a bunch of articles written about that. But, you know, plugging a orphan well, I don't think everybody can argue with

43:47 the science. That's good for the environment and probably just good for society as a whole. And that's being driven by people who will pay for those carbon offsets. And, and I mean, the demand is

43:56 there. I mean, I got off the phone yesterday with someone saying, Hey, can I earn money by, by plugging these wells? You know, how can I get carbon revenue? So, um, their potential could be

44:07 more supply than there are buyers. But, you know, as we continue to shift toward valuing that, then, then yeah, there's, there's certain ways you can get real concrete results. Yeah. Because

44:17 I don't know how big I am on greenhouse gases and whether I care that much. I hate to say that YouTube's probably going to yank down our, our video now. But I am pretty adamant that we need to get

44:29 rid of pollution.

44:32 And I'm probably, this has been Colin's big thing, and I think he's got me roped in and I'm starting to believe, and the plastics is a bad thing too. Yeah. Yeah. Yeah. Colin and I were actually

44:46 at a conference out in California last week, and they showed a picture from a refinery in East of LA. looking out toward inland toward the mountains. And they're like, you wouldn't have been able

44:57 to see the mountains 30 years earlier. Yeah There's no doubt, especially going after the NOx and VOC, which we talked about earlier, these emission reduction credits, they make meaningful

45:08 differences. I mean, Houston has done a tremendous job of where it was 25 years ago versus where they are. And it's mainly due to this program. Yeah. Oh, cool. Well, glad you came back to work,

45:23 because I have a

45:25 friend that told me once he sold his company. I was like, what are you doing? And he said, well, you know, I'm starting another one. And I go, come on, man, you got enough money. Why are

45:36 you doing that? And he goes, you can't have children and be the pajama guy. What does my dad do? He wears his pajamas all day. Yeah. You can't do that. So yeah. Yeah. There was that song,

45:48 you know, and I forget the name, but the lyrics were wake up. It's time to make money. And so my kids would come play that one. Time to make money. Yeah. That's all. And you know, I played a

45:57 lot of golf with a bunch of 70 year olds Tuesday at 11 am. But then I was like, I don't know if I could do this every day. So yeah. But yeah, I was willing to try. You know, I gave it a, I

46:07 gave it a good run there. Colin's got me out selling enterprise AI software. We're going to change the name of the podcast. Chuck Yates has a job because I feel like he's actually got me working.

46:18 So yes. Yeah. I was, I was saying, yeah. Kalade, I was looking at some of the stuff that you guys are doing. That sounds exciting. Yeah. No, it's kind of crazy It's every technology out

46:29 there. right. We always overestimate it in the short term, but then wildly underestimate it in the long term. And so I think we're seeing that with AI, you know, people, you walk in and people

46:40 like, Can it tell me where to drill my well? And it's like, Well, I'll charge you a lot more of it, if I could. But it wouldn't surprise me if in three years, it's telling you where to space,

46:52 how to drill, et cetera. It's crazy how fast it's moving. Pretty cool stuff. All right, so give me one crazy thing in the year off that you did.

47:06 Well, kind of wild, funny, something. Yeah. I mean, you know, probably early on, I mean, we took a trip to Tampa. I went to LSU, so LSU had a college football bowl game on Saturday in Tampa.

47:25 And then Sunday, the New Orleans Saints played. in the same stadium 24 hours later. So me and my buddy, and it was New Year's as well. So, you know, you got New Year's Eve, you got the LSU

47:38 players hanging out at the hotels, which was all great. And then the added bonus, we're like, oh wait, the Tampa Bay Lightning is 200 yards from our hotel. They have a game on New Year's. So me

47:52 and my buddy were like, oh, let's see if we can get tickets. Who knows if there's a chance So we randomly just buy tickets off a stub hub. We end up second row, center ice. And we get in like

48:03 after tip off, waiting for the tickets to be downloaded. Get in and the woman's like, oh, do you buy tickets from our friends? Like, yeah, and she's like, you know, these are club seats,

48:12 right? We're like, no, she's like, yeah, first two rows. You can go to the clubs and it's all you can drink or you can eat in it's New Year's. So we go up there and it's like 100, 000. 150

48:22 ticket turned out to be one of the best spends that we ever had. So we caught three major sporting events of all teams we were interested in within like a 30 hour period. And it's like, I don't

48:34 know if we could ever pull this off again and another location if you wanted to, but I mean, the Saints and LSU playing in the same stadium back to back. So, uh, so that was great. And then of

48:44 course, just hanging around Japan and, uh, you know, eating, eating all the food that we've never seen before was, was a great time as well. Yeah. So that's awesome. I did Japan's totally on

48:55 the, the bucket list. My eldest child, Charlie has always been my traveler. So she's been to China multiple times, Japan multiple times. Like my credit card has seen more of the world than I

49:10 have. And, uh, she raves about Tokyo and Japan. She, uh, she really likes it. I'd love to go do that Yeah, highly recommend. So how do people get in touch with you? Yeah, so, so, uh,

49:24 emissions expertscom, you know, Mike Taylor on, on LinkedIn, uh, two, two good places. But yeah, any, any companies that, you know, kind of are emitting in non-attainment areas plus on the,

49:36 on the demand side, any companies that are going to permit, you know, they should talk sooner than later because this is getting more expensive and, and supplies dropping could be a fatal flaw if

49:47 you don't plan ahead So yeah, and then it sounds like we'll have our calculator soon in terms of here's a typical P and A well in terms of what it will be worth if you shut it in. Yeah. Yeah.

49:59 We'll have that. We'll co-brand that.

50:03 Thanks for coming on, Dave. Yeah, thanks for having me again, Chuck, I appreciate it.